Axiata Group Berhad(” Axiata” or” the Group”) announces that it had entered into an unconditional trade and purchase agreement with Spectrlite UK Limited(” Purchaser”) for the trade of Reynolds Holding Limited(” Reynolds”) which owns roughly 80 equity stake in Ncell Axiata Limited(” Ncell”).
The Group’s decision to withdraw from Nepal is grounded on a thorough evaluation of the prevailing business terrain in Nepal, which led to the conclusion that continuing operations under the current conditions of illegal taxation and nonsupervisory misgivings was no longer sustainable for Axiata.
Axiata entered the Nepal request in 2016, following the accession of Reynolds for the purchase price of USD1.365 billion, effectively securing an 80 equity interest and controlling stake in Ncell. Between 2016 to 2020, Ncell had settled a aggregate of NPR47.0 billion( roughly USD421.9 million or RM1.8 billion1) in capital earnings duty( “ CGT ”) as full and final liability under Nepalese law and entered evidence from Large Taxpayers Office of Nepal( “ LTPO ”) in April 2020 that no farther levies remain in relation to the accession of Reynolds in 2016. Despite the payment of CGT, Ncell was farther assessed in January 2021 by the LTPO under Section 57 of the Income Tax Act of Nepal for a sum of roughly NPR57.9( roughly USD433.6 million or RM2.0 billion) for the same sale. Collection on this assessment by the Tax Authorities has therefore far been suspended due to an interim order issued by the Supreme Court of Nepal grounded on Ncell’s solicitation disputing the connection of the assessment. Capital gains duty was assessed on Ncell and Axiata after Nepal’s sweats to collect duty from the dealer failed.
The transnational arbitration proceedings filed by Axiata to the International Centre for the agreement of Investment controversies(” ICSID”) were concluded on 9 June 2023. In delivering its Award the arbitration bench( “ Tribunal ”) ruled in the Award that Nepal should refrain from demanding any farther duty, freights, penalties or interest in relation to the accession of Reynolds in 2016 and, in particular, that Nepal should refrain from administering the January 2021 Assessment. For farther information on the Award rendered by the Tribunal, please relate to our Media Release dated 12 June 2023.
While Axiata has prevailed on the Government of Nepal to abide by the terms of the Award, and specifically the termination of any attempts to constantly stretch the same sale, the Government of Nepal and its Tax Authority the LTPO have therefore far failed to withdraw the January 2021 assessment which is likely to carry a present day value of USD433.6 million inclusive of interest up to 13 January 2021 and penalties but banning any farther interest after thatdate.However, and ignoring any farther interest after 13 January 2021, this would take the total taxation on the USD1, If the January 2021 Assessment was upheld.365 billion sale in 2016 to USD855.5 million, or62.7 of the sale value.
Considering the imminent and empirical exposure arising from the script of double taxation, fresh threat associated with the expiry of the company’s mobile license in 2029, with the eventuality of appropriation of Axiata’s stake by the Government of Nepal and the unfavourable foreign investment protection terrain in Nepal, Axiata had accelerated its disquisition of an exit. The terms of the Share Purchase Agreement(” Gym”) with the Purchaser would enable Axiata to exit on a clean base.
crucial terms of the Gym include a fixed consideration and a tentative consideration. The fixed consideration is USD50 million, of which USD5 million is outstanding within 6 months of sale completion and the remainder is outstanding after 48 months post sale completion. Meanwhile, the tentative consideration is a share of the going forward distributions contingent upon the unborn business performance and net distributions declared by Ncell until 2029, and any benediction earnings secured by the Purchaser during this period.
Ncell retains full responsibility for its business and any of its arrears, and the Purchaser will further compensate Axiata against being and unborn Nepalese duty claims in relation to Ncell. The Board of Axiata has resolved that the stylish path forward for the Group would be to exit Nepal on the terms described.
Axiata and Ncell have made significant benefactions to the socio- profitable development of Nepal. As the country’s largest taxpayer, Ncell contributed NPR283.0 billion( RM9.9 billion) in levies and freights as of last Fiscal Year FY2021/2022 since its commencement. Ncell, both directly and laterally, supports further than 25,000 jobs and connects over 17 million guests across its networks. Under its Commercial Social Responsibility dimension, Ncell has invested further than NPR1.75 billion( RM61.2 million) in colorful social systems linked as critical to the nation that include education, health, disaster operation and terrain.
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Tan Sri Shahril Ridza Ridzuan, Chairman of Axiata said, “ Axiata and Ncell has made significant benefactions to the public development of Nepal. As the country’s largest taxpayer, Ncell contributed NPR283.0 billion( RM9.9 billion) in levies and freights as of last Fiscal Year FY2021/2022 since its commencement.
Meanwhile, over the once seven times, Ncell has made a total tip donation to the Group of RM2.2 billion.
This sale has allowed us to exit the country in a responsible manner. The ending of the trade and the completion of our exit from Nepal enables us to concentrate on our strategic precedences and continue our value creation trip. We’re now in a much stronger position to deliver on our strategy, upgrade our capital allocation precedences and explore the right strategic hookups. ”
Vivek Sood, Group Chief Executive Officer and Managing Director of Axiata said, “ Axiata has been in Nepal for seven times, working alongside hard- working associates in Ncell. still, the adding challenges in the operating terrain represents a abecedarian shift. It has led the Axiata board to conclude, after a thorough process, that our incursion in Nepal can not continue due to the unfavourable conditions for Axiata.
